G-2006-20

On the Coordination of Dynamic Marketing Channels and Two-Part Tariffs

This paper shows that the important result obtained in a static marketing channel,
namely, that the manufacturer can coordinate the channel through a two-part wholesale
tariff, does not extend to a dynamic setting. The existence of such a coordinated
two-part tariff is shown under the restrictive assumptions of (i) a full commitment by
the manufacturer to the vertically integrated solution; and (ii) a retailer that cannot
influence the evolution of the state (brand equity). However, the conclusion is that it
is not in the manufacturer’s best interest to commit.

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GERAD

GERAD is a multi university research center founded in 1979, financed by FRQNT.
It involves some seventy experts from a mix of disciplines: quantitative methods for management, operations researchers, computer scientists, mathematicians and mathematical engineers, from HEC Montréal, Polytechnique Montréal, McGill University and Université du Québec à Montréal.